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A Sleeping Giant

The Texas Gulf Coast is primed to become a top producer of clean hydrogen.
This article appeared in Vol. 18, No. 6 - 2022

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A Sleeping Giant

As the United States pours funding into the development of clean, reliable energy, the competition among candidates – including geothermal, nuclear and batteries – seems like a horse race as each resource perfects its competitive game. Yet a pocket along the Texas Gulf Coast appears to have a leading edge when hydrogen comes into play.

The area, abundant in refineries and petrochemical plants, is already the top producer of hydrogen in the country, having long produced the gas through steam methane reforming. The hydrogen is transported through hundreds of miles of pipelines and ultimately sold by companies such as Linde, Air Products and Air Liquide. Located along the Gulf Coast, these companies all have access to the area’s geologically unique and vast salt caverns – the world’s largest subsurface hydrogen storage site.

  • Infrastructure for US hydrogen economy. Credit: Ning Lin and Guinivere Mcdaid, Bureau of Economic Geology, University of Texas, Austin.

While the 3.6 metric tonnes of hydrogen currently produced in Texas creates CO₂ emissions, many believe the state is primed to become the leader in the production of clean hydrogen for wide-scale energy use. By integrating Carbon Capture Utilisation and Storage (CCUS) to the reforming process, a product called ‘blue hydrogen’ can be produced when the CO₂ by-product is stored in the sandstone reservoirs near the Gulf Coast.

To make ‘green hydrogen’, or hydrogen produced from renewable energy, Texas emerges as a potential leader once again. The state is the No. 1 producer of wind energy and in some estimates the No. 2 producer of solar energy in the country. Practically surrounded by depleted oil and gas reservoirs and natural gas pipelines – all which have potential for storing and transporting hydrogen – West Texas’s expansive solar and wind farms could become the top producers of what many consider the cleanest hydrogen.

“Texas is geared for a hydrogen surge that could revolutionise its already thriving energy industry by providing a clean fuel that will cut emissions, and the state can export to others in need,” states the Fuel Cell & Hydrogen Energy Association. “By bringing hydrogen into the fold and proving its viability, Texas has the potential to spread the technology to surrounding states and be integral to a nationwide hydrogen economy.”

Hydrogen Economy

To fill the gaps inherent in intermittent renewable power, blue or green hydrogen is the only large-scale energy storage solution that can provide carbon-free, commercial scalability, said Brian Weeks, senior director of Business Development for GTI Energy, which is a partner in a government-funded initiative with the University of Texas at Austin (UT) to demonstrate clean hydrogen projects. 

  • The Hydrogen Economy and Infrastructure. Source: US Department of Energy.

The US Department of Energy (DOE) reported that last year, 99 percent of hydrogen produced in the United States was ‘grey hydrogen’, named as such because of its CO₂ byproduct. Hydrogen production is anticipated to rise. By 2050, the hydrogen economy could lead to an estimated $750 billion per year in revenue and a cumulative 3.4 million jobs, according to a 2019 ‘Road Map to a US Hydrogen Economy’ study commissioned by the Hydrogen Fuel Cell Trade Association. 

If technology and the markets can support clean hydrogen, there is potential for a 16 percent CO₂ emissions reduction by 2050, provided there is a five-fold increase in clean hydrogen use, states the DOE.

The US government has funded tens of millions in projects to advance next-generation clean hydrogen technologies, and $400 million in hydrogen-related projects has been requested in the President’s Fiscal Year 2022 budget, up from $285 million in FY 2021.

Currently, hydrogen is predominantly used in the petrochemicals industry, but blue or green hydrogen could expand the gas’s use as a clean replacement fuel for the manufacturing of steel, cement and green ammonia. It also has the potential for fuelling heavy trucks and shipping vessels. And, hydrogen can be burned in gas turbines or run through fuel cells to generate cleaner electricity. Along the Gulf Coast, a transition to blue hydrogen seems an obvious first step in the eyes of Andy Steinhubl, a former production operations engineer for ExxonMobil, energy consultant, and chair-elect of The Center for Houston’s Future, a non-profit organisation that addresses matters of high importance to the Greater Houston region.

“Greater Houston is a sleeping giant,” he said. “We make a lot of grey hydrogen. But we could start converting grey to blue by tapping existing CCUS surface and subsurface assets and could readily scale such a system.” 

He believes the infrastructure developed by Denbury for enhanced oil recovery via CCUS could potentially be linked by pipeline to Texas’s steam methane reforming plants to capture CO₂ emissions and jumpstart production of blue hydrogen. “If we start making blue hydrogen, we can start supporting existing and new markets while we begin incentivising and driving down the costs of production of green hydrogen,” Steinhubl said, explaining that current estimates place a higher cost on green hydrogen. 

In line with this vision, companies including ExxonMobil, Calpine and Dow recently announced a consortium to develop a regional CCUS system once a viable economic framework is established.

Upscaling to Blue

While the Gulf Coast’s salt caverns – which allow for rapid injection and production – have long been used for hydrogen storage by the petrochemicals industry, storing hydrogen for largescale energy needs will likely require that the gas be stored in other geological formations, including sandstone and carbonate reservoirs, said Mark Shuster, deputy director of the Energy Division for the Bureau of Economic Geology (BEG) at UT.

Large-scale CCUS activities will require extensive CO₂ storage as well. Currently, pilot projects led by the DOE and the BEG both onshore and in state waters are looking at potential storage sites.

  • Migration of CO2 within reservoir must be monitored through 4D seismic and other methods to ensure cap rocks are not breached and the gas remains in place. Credit: Shuvajit Bhattacharya, Bureau of Economic Geology, University of Texas, Austin.

“Hydrogen made from natural gas through steam methane reforming and autothermal reforming is the cheapest way to generate blue hydrogen, even if you make cost assumptions about carbon storage,” Shuster said. “We (the United States) can generate plenty of hydrogen – 10 million metric tons per year – but we do not have large-scale CCUS. That is the critical next step to producing blue hydrogen.” 

Many believe it’s only a matter of time before government incentives – such as the tax credits offered for CCUS in accordance with Section 45Q of the Internal Revenue Code – make largescale CO₂ storage economically feasible. In fact, the DOE is currently funding initial engineering of a commercial-scale advanced CCUS system from steam methane and autothermal reforming plants. 

In order to move hydrogen beyond the Gulf Coast and into larger markets, Shuster said there is potential for blending hydrogen into the country’s extensive oil and gas pipeline network – totalling roughly 3 million miles of pipelines with 4.25 Tcf of storage.

“The gas infrastructure system in the US is the most expansive and connected gas network globally and could be used to transport and distribute renewable methane and hydrogen,” Shuster wrote in a May 2021 publication of Oil & Gas Journal. “If it were, it would be a bridge to a fullscale hydrogen economy in the United States.” 

Furthermore, large turbine manufacturers are looking at hydrogen blends for their equipment to improve emissions profiles, Weeks said. “That’s another application along the Texas Gulf Coast.” A blend of natural gas and no more than 10 percent hydrogen produced alongside CCUS would have an “appreciable impact” on reducing emissions, Shuster said. Based on an average daily natural gas consumption rate of 85 Bcf, with each Bcf containing approximately 53,000 tonnes of CO₂, a 10 percent blend of blue hydrogen could remove 450,000 tonnes per day of CO₂ from natural gas emissions, he said. This represents roughly 3.2 percent of total CO₂ emissions in the United States in 2019.

Going Green

In West Texas, where the wind blows hardest at night, peak energy production often crosses paths with periods of low consumption, creating an excess of low-cost energy that cannot be stored. As a result, utility companies are becoming interested in converting this energy into hydrogen via electrolysis and storing it for future use.

“Electric and gas utilities were never interested in hydrogen before until recently,” Weeks said, adding that storing hydrogen will allow more renewables to come online, and the natural gas grid can help the electric grid store energy.

This power-to-gas concept is being explored in several ways: transporting the hydrogen by pipeline, truck or rail to more populated areas of Texas, and storing it on site in depleted oil and gas reservoirs and natural gas pipelines, Weeks said.

“If we want to have a significant hydrogen market in the near term, we need to build on our existing assets,” he said. “That is the quickest way to get to zero carbon goals.”

Similar to blue hydrogen, green hydrogen does not come without challenges. Current electrolysis technology is considered outdated and costly, practically mandating that the production of hydrogen occur during times when renewable power is cheapest.

  • The geology and internal structure of salt domes and caverns must be fully investigated and understood before they can be considered for CO2 or hydrogen storage. Credit: Oliver Duffy, Bureau of Economic Geology, University of Texas, Austin.

To store greater volumes of hydrogen, optimisation in existing salt caverns may be needed in addition to testing other geological reservoirs for large-scale storage, Shuster said. However, with California leading new hydrogen market development in fuel-cell vehicles and hydrogen fuelling stations, there is potential to transport hydrogen via pipeline by repurposing an existing pipeline corridor from Texas to the West Coast, Steinhubl said.

Early market potential also exists in Europe. “The Netherlands, Germany, they are all trying to find qualified suppliers,” he added. “They can’t get nearly the hydrogen they need to meet intermediate and 2050 objectives. The world is going to need exporters.”

Emerging Market

Realising the Gulf Coast’s potential, the DOE, through its [email protected] initiative, has invested $5.4 million in a two-part project to better understand the potential for integrating hydrogen with multiple platforms throughout the economy.

The project, currently taking place at UT, includes a demonstration of clean hydrogen production from electrolysis and from steam methane reforming using renewable natural gas from a landfill. The hydrogen is then used as a power source for a data centre on campus.

Furthermore, the University is home to Texas’s only hydrogen fuelling station, which is being used to help demonstrate to local legislators the benefits of fuel cell vehicles as part of the project. 

  • Students from the University of Texas at Austin have been designing a fuel cell hybrid powertrain for hydrogen-powered delivery vans. They are being used by UPS in California. Credit: Roy Pena, Center for Electromechanics, University of Texas, Austin.

“People trained in oil and gas are very well suited for applying hydrogen and using their skills in the Houston economy and decarbonisation machine. Texas is very well suited for that,” said Alan Lloyd, a research associate at the University’s Center for Electromechanics (CEM) and former secretary of the California Environmental Protection Agency under Gov. Arnold Schwarzenegger, a supporter of hydrogen.

From a broader scope, the [email protected] project includes developing a framework for leveraging Texas’s wind power, its natural gas resources and hydrogen infrastructure at the Port of Houston and Gulf Coast region.

When Steinhubl looks at Houston’s bustling port – the nation’s No. 1 port in total foreign and domestic waterborne tonnage – he sees an ideal point of entry for clean hydrogen in heavy trucking.

Located among a sea of steam methane reformers, with hydrogen supplies practically on site, the port is a major hub for transport trucks. When compared to diesel fuel, both grey and blue hydrogen are competitively priced, lower emitting, and they can boast being lighter weight and faster fuelling with high ranges compared to an electric battery, he said.

“Tapping high density trucking corridors minimizes the infrastructure required to achieve meaningful scale regionally, thereby improving the economics of market entry and expansion,” Steinhubl said.

According to the International Energy Association, fuel cell electric vehicles could reach 8 million by 2030 in developed nations and a 25 percent share of road transport by 2050.

Mountains and Milestones

While the potential for clean hydrogen abounds, there are large hurdles to overcome. Hydrogen can be stored indefinitely as a compressed gas, but ample and effective storage for hydrogen and CO₂ must be identified and sufficiently tested. 

Transporting hydrogen beyond the region will require additional hydrogen-dedicated pipelines or effective blends with natural gas into existing natural gas pipelines. Both scenarios will require extensive modelling to determine their feasibility, Shuster said.

In addition to the need for largescale CCUS systems and more efficient electrolysis, the majority of hydrogen proponents in Texas agree that a major missing piece to a clean hydrogen market is policy.

“You’ve got a lot of activity from the corporation side, but where are policy drivers?” Lloyd asked. 

Unlike California, where the Low Carbon Fuel Standard is leveraging a clean energy market, Texas – which is not a policy mandate-driven state – trails by comparison. If the federal government would notch up 45Q tax credits, for example, “we could unleash all kinds of blue hydrogen,” Steinhubl said, adding that forming a coalition of players across the hydrogen value chain could break open the budding industry.

“Government investments in R&D enable the private sector to advance a lot faster,” said Bob Hebner, director of UT’s CEM. “There is great interest in inventing new market structures. I would not be surprised to see changes well within the next decade or half that time. But progress requires money on the table.”

Lloyd believes the large budget items for clean hydrogen in the current infrastructure bill will shift things into gear. “If this infrastructure bill gets signed, money will be coming,” he said.

The Center for Houston’s Future has applied for funding from the DOE’s Energy Earthshots initiative to help create a clean hydrogen hub in the Greater Houston area for heavy trucking and exports of blue and green hydrogen. 

Yet the energy industry is already breaking barriers. New technology to decrease the cost of steam methane reforming and produce pure streams of hydrogen and CO₂ – bypassing the need for carbon capture – is on the horizon, Weeks said, noting that CO₂ storage would still be required.

Utility Global, which has reported the development of an electrolyser that is less costly and more effective than current technology, has announced plans to relocate to Houston from Utah. And, the utility Entergy is developing a power plant near Bridge City, Texas, that will be capable of burning a combination of natural gas and hydrogen for electricity. 

“The more I look at Texas, I say, Wow, we’ve got solar, wind, caverns, the ability to have world-scale hydrogen production,” Steinhubl said. “We can be the energy transition capital of the world and the low carbon leader as well. It’s clear we have a path. When it happens, it’s going to be quite powerful here.”

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